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1. On 1/1/10, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 12,000 shares of common stock at $40 per share. The par value is $10 per share. 2.On 2/1/10, options were granted to each of five executives to purchase 12,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/12. It is assumed that the options were for services performed equally in 2010 and 2011. The Black-Scholes option pricing model determines total compensation expense to be $1,300,000